Indian equities end a lackluster session with modest cut

It turned out to be a dismal performance from the benchmark indices on Tuesday, as they failed to snap the session in the positive territory and settled marginally below the neutral lines. The frontline indices took a breather, a session after showcasing a scintillating performance, as market participants turned cautious after North Korea test-launched an intermediate-range ballistic missile days before leaders from the Group of 20 nations are due to discuss steps to rein in Pyongyang's weapons programmes. On the domestic front, fear of uncertainty over the implementation of the Goods and Services Tax (GST) has cast its shadow on manufacturing activities as growth in the sector fell to a four-month low in June, showed the widely-tracked Nikkei purchasing managers' index (PMI). The PMI dropped to 50.9 in June from 51.6 the previous month, as a softer rise in new orders resulted in weaker growth in production. However, losses in the benchmark indices were capped with the Railway Minister Suresh Prabhu’s statement that the India’s GDP growth to the tune of 8-9% was expected and the new tax rates would contribute significantly towards this. He also said the GST aims at increasing the number of taxpayers and, as the tax revenue rises, the GDP will also increase. Some support also came with the report that the Financial Stability Board (FSB), an international body for global financial system, placed India in the league of countries that are ‘compliant or largely compliant’ on implementation of priority area reforms.

On the global front, Asian markets ended lower on Tuesday, as oil prices dipped after eight days of gains and North Korea launched a ballistic missile into the waters between Korea and Japan- its first such launch in more than a month - which comes on the eve of Independence Day in the US. Further, Chinese shares edged lower,  as investors booked some profits after recent gains following US index provider MSCI's decision last month to include China-listed stocks in its Emerging Markets Index. Meanwhile, Australia's central bank left interest rates unchanged on Tuesday and stuck to a neutral tone on policy despite recent signs of improvement in the economy and a swing toward more hawkish guidance among its global counterparts.

Back home, telecom stocks came under selling pressure after telecom group GSMA said that the disruptive pricing due to heightened competition in the Indian telecom space would continue for at least another year and the situation is no different from other markets where carriers were cutting tariff to beat competition. Auto stocks declined on reports that the Maharashtra government decided to increase tax on the registration of all new vehicles by 200 basis points. The tax increase is an attempt to compensate for the revenue loss that the state treasury will incur due to the abolition of octroi and local body tax from July 1, 2017. However, energy heavyweights such as Reliance Industries, Bharat Petroleum and ONGC gained on account of lower crude oil prices.

The market breadth remained optimistic, as there were 1350 shares on the gaining side against 1308 shares on the losing side, while 135 shares remained unchanged.

Finally, the BSE Sensex declined 11.83 points or 0.04% to 31209.79, while the CNX Nifty was down by 1.70 points or 0.02% to 9,613.30. 

The BSE Sensex touched a high and a low of 31353.46 and 31166.37, respectively and there were 10 stocks on gainers side as against 21 stocks on the losers side on the index.

The broader indices ended in red; the BSE Mid cap index declined 0.34%, while Small cap index was down by 0.04%.

The top gaining sectoral indices on the BSE were Energy up by 1.37%, Oil & Gas up by 0.56%, IT up by 0.33%, TECK up by 0.11% and Metal up by 0.06%, while Healthcare down by 0.73%, Telecom down by 0.68%, FMCG down by 0.66%, Realty down by 0.64% and Auto down by 0.48% were the top losing indices on BSE.

The top gainers on the Sensex were Reliance Industries up by 2.79%, HDFC up by 1.28%, Kotak Mahindra Bank up by 1.10%, Infosys up by 0.96% and Adani Ports & SEZ up by 0.87%. On the flip side, Axis Bank down by 2.08%, Hero MotoCorp down by 2.04%, Dr. Reddy’s Lab down by 1.88%, ITC down by 1.52% and Tata Motors - DVR down by 1.32% were the top losers.

Meanwhile, domestic credit rating agency, ICRA in its latest report has said that the growth momentum of the Indian pharmaceutical industry is likely to witness moderate in the next three years, largely owing to slowdown in revenues from the United Sates, increasing competition and adoption of generics reaching a saturation level. Apart from this, it also noted that increased regulatory scrutiny and consolidation of supply chain in the US market along with increased R&D expenses will also have an impact on profitability of Indian drug companies. 

The rating agency has pointed out that the overall aggregate revenues of 21 leading players increased only by 7.4% in FY17 as compared to 10.1% posted in the previous fiscal year. For the period between FY18 to FY20, it noted that the Indian pharma sector is expected to surge at 7-10% after mid to high double digit growth over the last five years. It also said that revenue growth from US during FY 2012-17 period for its sample set experienced a compounded annual growth rate (CAGR) of 19.3%. However, ICRA has stated that growth from the US has come down to 4% in FY17 from 14.4% in FY16, with the fourth quarter of FY17 registering negative growth despite consolidation and currency benefits.

The report further said that the continued regulatory interventions in domestic market are expected to put some pressure in near term though long-term growth prospects for domestic pharmaceutical market remain healthy given increasing penetration, accessibility and continued new launches. The report also noted that the domestic pharma industry has gained adequate scale and drug development capabilities over the last decade of growth which would keep them in good stead to capture new opportunities in the US market.

The CNX Nifty traded in a range of 9,650.65 and 9,595.50. There were 21 stocks in green as against 30 stocks in red on the index.

The top gainers on Nifty were Reliance Industries up by 2.97%, Tata Power Company up by 1.43%, BPCL up by 1.19%, HDFC up by 1.07% and Bharti Infratel up by 1.07%. On the flip side, Indiabulls Housing Finance down by 2.35%, Dr. Reddy’s Lab down by 2.26%, Hero MotoCorp down by 2.02%, Axis Bank down by 1.85% and Bank of Baroda down by 1.76% were the top losers.

The European markets were trading in red; UK’s FTSE 100 decreased 4.6 points or 0.06% to 7,372.49, Germany’s DAX decreased 22.6 points or 0.18% to 12,452.71 and France’s CAC decreased 6.13 points or 0.12% to 5,189.59.

Asian equity markets ended in red on Tuesday as oil prices dipped after eight days of gains and North Korea launched another ballistic missile in the direction of Japan, prompting US President Donald Trump to declare it is ‘hard to believe South Korea and Japan will put up with this much longer’. Japanese shares ended lower as the yen rebounded strongly following North Korea's claim that it has successfully test-launched an intercontinental ballistic missile. Further, Chinese shares fell as investors booked some profits after recent gains following US index provider MSCI's decision last month to include China-listed stocks in its Emerging Markets Index.